It is crucial to outweigh the impact that the location of warehouses play in the supply chain. Some advantages to avian a small number of centrally located warehouses is that inventory is consolidated adding ease to the inventory management process, therefore reducing ordering and holding costs. Consolidation of product storage allows for larger batches and lower costs. Safety stock lowers with centralization. Inbound transportation would be low and cheap, but outbound transportation would be more expensive due to lack of proximity to end customers.
On the other hand, there are pros to having a larger number of warehouses closer to the end customer, the most obvious one being shorter lead time and cheaper outbound transportation cost. Short distances permit frequent distribution of inventory. Having inventory spread out among multiple warehouses would however make forecasting an even more challenging task. 8-Consider a firm selecting a supplier of transportation services? What are the advantages to using a truckload carrier?
Choosing the right transportation method speeds up the supply chain not only by making it more effective, but it also allows for easier estimation of delivery times. Contracting a strategic partnership with a truckload carrier is typically the timeliest/most effective method available. It increases reliability by ensuring the safety of goods Ewing transported for these are not handled Norte nor are they mixed with other customer’s/company’s freight. 9-What are the advantages to a firm of high inventory levels? What are the disadvantages? What are the advantages of low inventory levels?
The disadvantages. A key component of a successful supply chain is the balancing of costs and how effectively companies reflect a realistic inventory by forecasting how to meet the demand Of goods. As the textbook suggests, holding the right amount of goods at the right time is an extremely difficult task. Because the market is constantly changing and forecasts are not a very accurate tool, there are risks in both high/low levels of inventory. High inventory levels allow for more readily available inventory however a high inventory means that there is more capital at risk and high holding costs.
On the other hand, low inventory levels have less holding costs, but the risk of being unable to meet the demand is high. Chapter 2 2- How can firms cope with huge variability in customer demand? The textbook suggests, that a firm’s inventory policy must consider the following: Effective use of risk pooling strategies. The use of periodic review policies Tight management of usage rates, lead times, and safety stock. Reducing/ keeping safety stock Following the BBC approach Shift more inventory to suppliers Use quantitative approaches 3-What is the relationship between service and inventory levels?
The following are some of the relationships explained in chapter 2: High service level-?high inventory level Longer lead time-?lower level of service Lower inventory level-higher impact of a unit of inventory on service level and therefore expected profit. Products with high profit margin, high volume, low variability and short lead times typically mean higher service levels. 4- What is the impact of lead time, and lead time variability, on inventory levels? The longer the lead time to the facility, the lower the level of service provided by the facility.
Figure 2-11 shows how service levels compare to inventory levels as a function of lead time. 5-What factors should management consider when determining a target service level? See slides 2. 1-2. 5 There are different ways in which target service level is determined. It can be established by the downstream customer, or the facility may have the flexibility to choose the appropriate level of service by comparing the tradeoffs explained above in question. Another strategy is to “focus on maximizing expected profit across all, or some, of their products” (page 47).
Service levels will be higher for products with high profit margin, high volume, low variability and short lead time. 6-Consider the (Q,R) policy analyzed in Section 2. 2. 6. Explain why the expected level of inventory before receiving the order is Z x SST D x FL While the expected level of inventory immediately after receiving the order is Q + z x SST x ;IL R consist of 2 components, average inventory during lead time and safety stock.